Insurance Riders Explained

Questions and Answers

What is another term for the Guaranteed Insurability Rider?

Guaranteed Purchase Option (correct)

Future Payment Option

Disability Income Rider

Income Protection Rider

At what age do most companies typically stop allowing the additional purchase option to be exercised?

Age 45

Age 40

Age 55

Age 50 (correct)

What must the insured meet before each purchase to prevent over-insurance?

Income Declaration

Health Assessment

Insurance Review

Earnings Test (correct)

How often is the insured typically provided the option to purchase additional coverage?

Every two years Signup and view all the answers

What determines the premium for the additional amount of insurance purchased through this rider?

Insured's attained age Signup and view all the answers

What is the primary purpose of an impairment or exclusion rider?

To eliminate coverage for a specific pre-existing condition Signup and view all the answers

Which statement correctly describes how impairment riders affect insurance coverage?

They may be temporary or permanent but reduce coverage. Signup and view all the answers

What might happen if a physician has a back injury when applying for a disability policy?

They may receive a policy with an exclusion rider for the back injury. Signup and view all the answers

What factors does the underwriter consider when issuing a policy with an exclusion rider?

The potential for future claims related to the specific condition. Signup and view all the answers

What is a defining feature of the impairment rider compared to other types of insurance riders?

It eliminates standard coverage for specific conditions. Signup and view all the answers

Why might someone need to use an impairment rider to obtain insurance?

They have a pre-existing impairment and need coverage for other disabilities. Signup and view all the answers

What happens to the premium when an impairment rider is added to a policy?

It remains unchanged despite the reduction in coverage. Signup and view all the answers

When may an exclusion rider be made permanent?

When the underwriter decides based on the insured's treatment history. Signup and view all the answers

Study Notes

Impairment or Exclusion Rider

An impairment (exclusion) rider is attached to insurance contracts to exclude coverage for specific pre-existing conditions, like back injuries.
Riders can be temporary or permanent depending on the underwriter's decision when writing the contract.
This rider allows individuals with existing impairments to obtain insurance at reasonable costs, despite exclusion of certain conditions.
Example: A physician with a back injury can secure a disability policy, but it excludes claims related to back injuries; other disability claims are still covered.
Terms of the rider are explicitly detailed in the policy, ensuring clarity on exclusions.
Unlike most insurance riders that add coverage and cost, the impairment rider reduces coverage without decreasing the premium.

Guaranteed Insurability Rider

Also known as the Future Increase Option or Guaranteed Purchase Option.
This rider allows insured individuals to purchase additional disability income coverage without having to prove insurability.
Option dates for additional purchases are typically set every two years, limited by a maximum age—commonly age 50.
Premiums for newly purchased insurance amounts are determined by the insured's age at the time of exercise.
To prevent over-insurance, a specific earnings test must be met before additional coverage can be purchased.
Each option date usually has a cap on the amount that can be purchased, generally ranging from $500 to $5,000.

Description

This quiz explores the concept of impairment or exclusion riders in insurance policies. Learn how they can affect coverage for pre-existing conditions and the implications for policyholders. Gain a better understanding of how these riders function and their impact on affordability.